Loading judgment…
Facts
The revenue filed an appeal against the order of the CIT(A) who allowed the assessee's claim for deduction of Rs. 55,31,05,883/- under Section 80P of the Income Tax Act, 1961. The assessee, a cooperative society, had earned interest from deposits with cooperative banks.
Held
The Tribunal held that the assessee, being a cooperative society earning interest from other cooperative banks, is eligible for deduction under Section 80P(2)(d) of the Act. It was noted that the distinction between a cooperative society and a cooperative bank, as argued by the revenue, was not relevant in this context, and relied on Supreme Court and other High Court judgments.
Key Issues
Whether interest earned by a cooperative society from deposits in cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, especially when the revenue argues the society is not a primary agricultural credit society or cooperative bank.
Sections Cited
80P, 80P(2)(a)(i), 80P(2)(d), 80P(4), 143(3), 144B, 250
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER & SHRI ANIKESH BANERJEE
O R D E R Per Anikesh Banerjee (JM):
The instant appeal of the revenue was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter called, ‘Ld. CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2020-21, date of order 17/10/2023. The impugned order emanated from the order of the Assessment Unit, Income-tax Department (in short, the “Ld. AO”) passed Shivkrupa Sahakari Patpedhi Limited, Mumbai under section 143(3) of the Act read with section 144B of the Act, date of order 26/09/2022.
The revenue has taken the following grounds: - “1. "Whether on facts and in the circumstances of the case and in law, the learned CIT(A) was correct in allowing deduction of Rs 55,31,05,883/- under section 80P of the Income Tax Act, 1961 to the assessee by holding that the assessee is a cooperative society and not a cooperative bank and is entitled for deduction u/s 80P of the Income Tax Act, 1961 without, appreciating the fact that the assessee society is neither a primary agricultural credit society not primary cooperative agricultural and rural development bank and thus as per sub-section (4) of the section 80P of the Act , the assessee is not eligible for availing deduction u/s 80P(2)(a)(i) the Act."
2. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
The Ld.DR argued and stated that the Ld.CIT(A) wrongly allowed the appeal of the assessee and he stands in favour of the impugned assessment order.
The Ld.AR argued that the assessee is a co-operative society and earned interest from investment in co-operative bank. So, the assesse is eligible for deduction under section 80P(2)(d) of the Act. The Ld.AR respectfully relied on the order of the Ld.CIT(A), the relevant paragraph of the order of the Ld.CIT(A) is extracted below:- “8.6. During appeal proceedings, the appellant was requested to provide the bifurcation of the interest earned from deposits with banks into the interest earned from deposits with co-op banks and the interest earned from deposits with other banks. In response thereto, the appellant has furnished following details of the disputed interest income of Rs. 55,31,05,984: SR.NO BANK NAME Nature of Interest INT. AMT. 1 Mumbai District Co-operative Bank Interest on deposits with Co-operative Bank 86,98,811 2 Thane Janta Sahakari Interest on deposits with Co-operative Bank 5,10,81,608 3 Dombivali Nagar Sahakari Interest on deposits with Co-operative Bank 1,35,06,879 Coperative Bank Shivkrupa Sahakari Patpedhi Limited, Mumbai 4 Saraswat Bank Limitd Interest on deposits with Co-operative Bank 334,37,248 5 Karad Bank Limited Interest on deposits with Co-operative Bank 1,78,75,385 6 Bharat Co-operative Bank Limited Interest on deposits with Co-operative Bank 5,62,04,739 7 Abhyudaya Co-operative Bank Interest on deposits with Co-operative Bank 1,184 Limited 8 Thane Bharat Sahakari Bank Interest on deposits with Co-operative Bank 48,46,121 9 Shamrao Vithal Co-operative Bank Interest on deposits with Co-operative Bank 4,01,43,188 10 Hindustan Bank Interest on deposits with Co-operative Bank 5,54,163 11 Cosmos Co-operative Bank Interest on deposits with Co-operative Bank 9,794 12 NKGSB Co-operative Bank Limited Interest on deposits with Co-operative Bank 5,40,07,949 13 Apna Sahakari Bank Limited Interest on deposits with Co-operative Bank 2,85,52,450 14 Maharashtra State Co-operative Interest on deposits with Co-operative Bank 52,20,051 Bank 15 Sahara District Central Co-operative Interest on deposits with Co-operative Bank 2,56,07,380 Bank Limited 16 Janseva Sahakari Bank Interest on deposits with Co-operative Bank 1,82,01,679 17 Kalyan Janata Sahakari Bank Interest on deposits with Co-operative Bank 1,79,06,517 18 Punjab an Maharashtra Co- Interest on deposits with Co-operative Bank 1,76,06,617 operative Bank 19 Jaoli Sahakari Bank Interest on deposits with Co-operative Bank 47,76,852 20 GP Parsik Sahakari BaNK Interest on deposits with Co-operative Bank 5,14,47,276 21 Janata Sahakari Bank Interest on deposits with Co-operative Bank 4,54,05,645 22 Municipal Co-operative Bank Limited Interest on deposits with Co-operative Bank 5,59,81,760 23 Satara Sahakari Bank Limited Interest on deposits with Co-operative Bank 10,56,002 24 Interest on Bank Deposits Interest earned by branches of assesse on 9,735 deposits with other co-op. banks 25 BANK A/C (CD) Interest earned by branches of assesse on 4,500 deposits with other co-op. banks 26 BANK Interest earned by branches of assesse on 84,249 deposits with other co-op. banks 27 Mumbai District Central Cooperative Interest on deposits with Co-operative Bank 3,167 Bank 28 BANK A/C (CD) Interest earned by branches of assesse on 9,866 deposits with other co-op. banks 29 Raigad District Central Co-operative Interest on deposits with Co-operative Bank 7,54,275 Bank Limited TOTAL 53,31,05,584 On perusal of the above details, it is noted that the entire disputed interest from the outside deposits/investments has been earned from various co-operative banks/societies only. Therefore, deduction u/s Sec, 80P(2)(d) of the I.T. Act. is allowable to the appellant on the entire amount of interest earned on investments/deposits with from Co-operative Banks/ other co-operative society. Therefore, the Assessing Officer was not justified in denying the said deduction u/s Shivkrupa Sahakari Patpedhi Limited, Mumbai 80P(2)(d) to the appellant. Accordingly, the disallowance of deduction u/s 80P made by the A.O. in respect of the interest income of Rs. 55,31,05,883 is hereby deleted. The Ground No. 3 raised by the appellant is, thus, allowed.”
We heard the rival submissions and considered the documents available on the record. The alleged issue is well settled by the Hon’ble Apex Court and by the ITAT, Mumbai Benches that a co-operative bank is in the nature of co-operative society. So the interest earned by the assessee from the co-operative bank is eligible for deduction under section 80P(2)(d) of the Act. The same issue was dealt by the co-ordinate bench of ITAT-Mumbai, F-Bench in the case of Jaimuni Sahkari Patpedhi Maryadit in to 334/Mum/2025 order dated 06/03/2025, wherein it has been held as follows:-
“6. We heard the rival submissions and considered the documents available on record. The only issue as agitated by the assessee society related to interest and dividend from co-operative banks which is claimed as deduction under section 80P(2)(d) of the Act. The Ld. CIT(A) in his order had referred the judgement of Hon’ble High Court of Gujarat in the matter of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd v. ACIT [2022] 140 taxmann.com 602 (Gujarat) wherein the deduction of 80P(2)(d) were not allowed to the appellant. The Ld. AR distinguished that inference drawn in the instant matter as compared to the matter relied upon by Ld.CIT(A) in pronouncement of his Order. In the matter of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd (supra) the facts were that the Appellant had received interest income from both Co-operative Banks as well as Nationalised Bank and the same was claimed as deduction u/s 80P(2)(d).Whereas in the instant case, the assessee has received interest only from Co operative Banks. Section 80P(2)(d) provides for deduction of interest received by a Co-operative Society from another Co-operative Society. A Co-operative Society being a Co-operative Society fits into the permissible provisions of the deductions. Thus the case referred by the Ld. CIT(A) in his judgement is not applicable or relatable to the facts of the instant case.
Shivkrupa Sahakari Patpedhi Limited, Mumbai The Ld. AR argued that the two judgements passed by same Hon'ble Gujarat High Court in which the Ld. CIT(A) had relied on are distinguishable pertaining to the claim of deduction u/s 80P(2)(d).
The Ld. AR respectfully relied on the order of Hon’ble Gujrat High Court in PCIT v. Ashwinkumar Arban Co Operative Society Ltd [2024] 168 taxmann.com 314 (Gujarat) wherein the high court has allowed the deduction claimed by the appellant u/s 80P(2)(d) taking into consideration the judgement passed by Hon'ble Apex Court in the case of Kerala State Cooperative Agricultural and Rural Development Bank Ltd v. Assessing Officer [2023] 154 taxmann.com 305/295 Taxman 675/458 ITR 384 (SC). The relevant extract is as follows- "28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarofi Mandali Ltd. (supra) as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. In the matter of PCIT v. Shree Madhi Vibhag Khand Udyog Sahakari Mandli Ltd [2025] 171 tomann.com 22 (Gujarat), wherein it was held that the appellant being a cooperative society, earning interest on investment made with a cooperative bank and claiming deduction under section 80P(2)(d), deduction was to be allowed under section 80P(2)(d).
8. Further the Ld. AR respectfully relied on the order of the Hon'ble Supreme Court in PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, Civil Appeal No. 8719/2022 dated 20/04/2023 it is held that, "…………Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4)shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act."
Shivkrupa Sahakari Patpedhi Limited, Mumbai The reliance was placed in the order of the Hon'ble Supreme Court in Kerala State Co- Operative Agricultural And Rural Development Bank Ltd. KSCARDB vs. Assessing Officer, [2023] 458 ITR 384 (SC), it has been held that, "15.14…………… Conclusion: In the instant case, although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949. In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the benefit of deduction under Section 80P of the Act."
The further reliance was placed on the following judgments of coordinate bench of ITAT which are as follows. i) (2014) 44 Taxmann.com 123 (Panaji Trib.) Tarani Mahila Co-op Credit Society Ltd. ii) (2014) 50 Taxmann.com 210 (Pune Trib) - MSEB Employees Co-op Cr Soc. Ltd iii) (2014) 59 Taxmann.com 97 (Bang Trib) Bagalkot District State Govt. Employees Co-op Credit Soc. Ltd. iv) (2014) 60 Taxmnn.com 163 (Hyderabad Trib)-Metrocity Criminal Courts Employees Mutually Aided Co-op. Credit Society v) (2014) 52 Taxmann.com 104 (Bang. Trib) Shree Laxmananda Multipurpose Co-op Soc. Ltd. vi)
(Assessment Year: 2013-14) Income Tax Officer Ward- 20(2)(2), Mumbai vs M/s. Mazgaon Dock Employees Co. Op. Credit Society Ltd dated 27.06.2018 vii) LT.A. No. 3048/Mum/2016 (Assessment Year: 2012-13) ITO 20(2)(2) vs M/s Mazgaon Dock Employees Co-op. Credit Society Ltd. dated 28/02/2018 viii) Assessment Year 2017-18 & ITA No. 165/MUM/2024 Assessment Year: 2020-21-Income Tax Officer-28.3.1, Mumbai vs Vaibhav Co-op Credit Society dated 29.05.2024 Shivkrupa Sahakari Patpedhi Limited, Mumbai 9. In our considered view the issue is well settled by the order of the Hon’ble Supreme Court. The revenue has restricted the claim of deduction U/s 80P(2)(d) in pursuance of section 80P(4) of the Act and the cooperative bank is not considered as cooperative society. Respectful reliance was placed on the order of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited (supra) and Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. KSCARDB (supra) where the Hon’ble Apex Court categorically stated that cooperative bank is the cooperative society and not acted as Bank under Banking Regulation Act,1949. We note the orders of the coordinate benches of ITAT who have taken same view in favour of the assessee. So, the interest earned from investment in cooperative bank is allowable deduction U/s 80P(2)(d) of the Act. The addition amount to Rs. 1,51,30,293/- is quashed.”
Accordingly, in our considered view, the order of the Coordinate Bench in Jaimuni Sahkari Patpedhi Maryadit (supra) is followed in adherence to judicial discipline. The disallowance of deduction under section 80P(2)(d) amounting to Rs.55,31,05,883/- is, therefore, held to be unjustified. The assessee is entitled to claim deduction under section 80P(2)(d) of the Act in respect of the interest income earned from co-operative banks. We find no infirmity in the impugned appellate order. Hence, the grounds raised
by the revenue are dismissed.